Danone Shares Plunge 8.42% at Close, Dragged Down by Chinese Risks
Danone's stock recorded the steepest decline in the CAC 40 this Wednesday, January 21, dropping 9.35% to 66.72 euros during the session, and ultimately closing at 67.40 euros, down 8.42%. Research offices have highlighted the fall in birth rates in China. Bank of America reiterated its underperform rating with a slightly lowered target from 70 to 69 euros. This move also follows a recall of infant milks in Singapore on January 17 involving two products including Danone's Dumex Dulac 1, after the detection of cereulide toxin.
Impact of Declining Birth Rates in China on Danone
Bank of America indicated that births in China have dropped to 7.92 million for the fiscal year 2025, a decline of 17% from the previous year, after a temporary rebound during fiscal 2024, where births had increased by 5.7% to reach 9.54 million. This trend directly impacts the group's infant nutrition business, a highly profitable segment. The bank estimates that China accounts for about 13% of the group's sales and approximately 30% of the adjusted operating income before interest and taxes. Infant nutrition in China is estimated to account for about 7% of the group's sales and 18% of the adjusted EBIT, supported by margins of around 35%. Demographic pressure remains pronounced, with women aged 20 to 34, identified as the cohort with the highest fertility, expected to decrease by about 2.2% per year over the next three years. Deutsche Bank downgraded its recommendation from buy to hold on January 13, lowering its price target from 74.00 to 67.00 euros, a level now close to the current price. Conversely, UBS raised its target from 86.00 to 95.00 euros on January 12 while maintaining its buy recommendation, and Bernstein upgraded its advice to outperform with a target raised from 83.00 to 92.00 euros on January 7.
Technical and Social Challenges Facing Danone
The stock is significantly below its 50-day moving average established at 76.85 euros, marking a significant technical break after several already difficult sessions. More concerning, the stock is now slightly below its 200-day moving average located at 74.00 euros, thus crossing an important psychological threshold for investors. This move below this long-term reference signals a structural weakening of the bullish momentum. The RSI is at 34, indicating a zone of relative weakness without signaling extreme overselling, which still leaves room for potential further adjustment. Beyond technical aspects, social tensions related to the announced closure of the Blédina factory in Villefranche-sur-Saône led to employee mobilization on January 20 during a managers' convention in Lyon, adding a social dimension to the operational context of the group. The upcoming annual results expected on February 20, 2026, will be scrutinized to confirm the group's ability to meet its commitments in a volatile environment. The guidance remains unchanged with revenue growth in comparable data between 3% and 5% and a faster increase in current operating income.
